UN agrees to Iraq euro account

Oct 30, 2000 01:00 AM

A United Nations committee gave Iraq the green light to open a euro-denominated bank account to handle deposits from oil sales -- a victory in Baghdad's campaign to stop using the hated American currency. The decision eased fears that Iraq would follow through on a threat to disrupt oil exports if its request to start collecting payment in the common European currency was denied.
The UN's sanctions committee on Iraq, made up of the 15 Security Council members, agreed it could not object to the request because it had no legal basis to block it. Nevertheless, the United Nations has warned that the switch could cost millions of dollars in lost interest and other revenue, diplomats and UN officials said.
The committee authorized its chairman, Dutch Ambassador Peter van Walsum, to draft a letter to the UN Secretariat giving it the go-ahead to create a euro-based account for Iraq, the officials and diplomats said. An account could be created soon.

Iraq informed the committee that it was extending its Nov. 1 deadline to create the euro account until Nov. 6. The United Nations already has a dollar-based escrow account at the French bank BNP Paribas in New York to receive payment for oil exported by Iraq through the UN oil-for-food program.
The program allows Iraq, under sanctions for its 1990 invasion of Kuwait, to sell its oil provided the proceeds are used to buy humanitarian goods for its 22 mm people. Currently, Iraq exports about 2.3 mm bpd.
Earlier this month, Iraq requested the United Nations create a euro-denominated account so it didn't have to receive payment for its oil in American dollars, which it considers the currency of an "enemy state." The UN Treasury Department said the change would be cumbersome and costly since oil is bought and sold internationally in dollars and recommended the proposal be studied further since the financial implications were so great.

The UN sanctions committee requested a report in three months on the implications of the change, including its costs and benefits. French Ambassador Jean-David Levitte complained that the Treasury report omitted any mention of potential gains of using the euro, which France and 10 other countries use. He noted that a significant portion of the humanitarian supplies Baghdad purchases through the oil-for-food program comes from countries that use the euro.
"Transactions in this currency would reduce costs for exporters which currently have to factor in variations in the euro-dollar exchange rate," he wrote Undersecretary General for Management Joseph Connor. Levitte also complained that the Treasury report concluded it was up to the sanctions committee, which is deeply divided over Iraq, to approve the switch to the euro account. He said there was no reference in any UN resolution that requires the committee to be involved in such dealings.

Source: AP
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